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Suppose that a drug company produces a new drug that cures baldness. The inverse demand curve for the drug is P = 205 – 20Q, where Q measures the number of pills in millions. The various costs of

Suppose that a drug company produces a new drug that cures baldness. The inverse demand curve for the drug is P = 205 – 20Q, where Q measures the number of pills in millions. The various costs of production are given by TC = 100 + 5Q, ATC = 5 + 100/Q, and MC = 5. If the government grants this firm a patent, it will earn profits of ______. If the government revokes the patent and the firm must sell its drug at marginal cost because of competition, it will earn profits of ______.

A) $600 million; $500,000

B) $2 billion; $0

C) $400 million; –$100 million

D) $70 million; –$25 million

I know the answer but do not know the steps to get to it. Thanks!

Aug 23 2021 View more View Less

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